SAN FRANCISCO - Sunrun Inc . (NASDAQ:RUN), a leading provider of residential solar, storage, and energy services, has announced its intention to offer $475 million in convertible senior notes due in 2030 in a private placement to qualified institutional buyers, according to market conditions and other factors.
The company also plans to allow the initial purchasers a 13-day option to buy up to an additional $75 million in notes from the date of issue. These notes, which will be senior, unsecured obligations of Sunrun, will pay interest semiannually starting September 1, 2024, and will mature on March 1, 2030, unless they are converted, redeemed, or repurchased before that date.
Sunrun stated that the notes could be converted into cash, shares of Sunrun's common stock, or a combination thereof, at the company's discretion. The interest rate and initial conversion rate will be determined when the offering is priced.
The net proceeds from the offering are earmarked for several purposes. Sunrun intends to use part of the proceeds to repurchase a portion of its 0% Convertible Senior Notes due 2026 in privately negotiated transactions. Another part will pay for the cost of capped call transactions, which are meant to reduce the potential dilution from the conversion of the new notes or to offset cash payments above the principal amount of converted notes. The remainder will go towards repaying outstanding debt and general corporate purposes, including potential acquisitions, although no specific uses or definitive agreements have been disclosed.
In relation to the notes offering, Sunrun expects to enter into capped call transactions with some of the initial purchasers or their affiliates. This is anticipated to generally reduce potential dilution from the conversion of notes and/or offset cash payments Sunrun is required to make. The initial purchasers' option to purchase additional notes could lead to further capped call transactions.
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